CADE signs leniency agreement in the cartel investigation in the public bid of Belo Monte hydroelectric power plant

The General Superintendence of the Administrative Council for Economic Defense initiated, on  November 16, the confidential Administrative Proceeding nº 08700.006377/2016-62 to investigate an alleged cartel in the public bid for the concession to operate Belo Monte’ hydroelectric power plant (UHE Belo Monte, for its acronym in Portuguese) - Public Auction nº 06/2009 - and in the private bid for the EPC (Engineering, Procurement and Construction) of  UHE Belo Monte by the winner consortium of the auction Norte Energia S/A.

The administrative inquiry resulted from the investigations regarding the so-called Car Wash Operation and relied on the Leniency agreement signed with the company Andrade Gutierrez Engenharia S/A on September 2016. The agreement was kept confidential, until now, in order to preserve the interest of the investigations.  

According to the agreement, which was jointly signed with the Federal Prosecution Office of the State of Paraná – MPF/PR (Car Wash Operation Task Force), the signatories confessed their participation in the conduct, provided information and provided evidence with the purpose of cooperating with the investigation of the alleged cartel.

In addition to the collaboration in exchange for criminal immunity by Andrade Gutierrez’s current and former executives with the MPF/PR, as part of the criminal action in course in the Federal Justice section in the city of Curitiba, CADE’s General Superintendence initiated the negotiation of the Leniency agreement proposal approximately ten months ago. The Leniency agreement was signed according to the articles 86 and 87 of Law 12.529/2011 (Brazilian Competition Law) and is related exclusively to the practice of cartel – an investigation that behooves to CADE.

The companies mentioned as participants of the alleged anticompetitive conduct are Andrade Gutierrez Engenharia S/A, Construções e Comércio Camargo Corrêa S/A Construtora Norberto Odebrecht S/A, and, at least, six currently and former executives of high level in these companies.

The exchange of communication between the competitors began in 2009 with the division of the group formed by the companies Andrade Gutierrez, Camargo Corrêa and Odebrecht in two consortiums. As detailed by the signatories, during the preparation of the companies’ bids, parameters regarding construction, distribution of risks among the companies and investors, and contingency of risks were developed. Such parameters  aimed to generate the parity of prices and conditions between the companies, harming competition, and seeking to ensure the viability of a collusive deal in Belo Monte.

The aforementioned arrangements were not successful at first, as another consortium won the Public Auction nº 06/2009. Nevertheless, the three competitors, as reported by the signatories, adapted the previous anticompetitive arrangement when they were further contracted for the construction of the Belo Monte hydroelectric power plant. In order to do so, the three companies would have again aligned variables that affected the price proposals to be presented separately by the companies in the private bid of Norte Energia S/A.

In the end, Andrade Gutierrez, Camargo Corrêa and Odebrecht were contracted by Norte Energia S / A, dividing the share of fifty percent of the construction regarding Belo Monte hydroelectric power plant that belonged to them . The anti-competitive contacts lasted until at least July 2011, when the contracts for the construction of Belo Monte were signed.

Part of the Leniency agreement is a document called Anticompetitive Conduct Records (Histórico de Conduta, for its acronym in Portuguese), in which the General Superintendence of CADE describes in detail the anticompetitive practice as reported by the signatories and subsidized by the evidentiary documents presented. By mutual agreement, CADE, MPF/PR and the signatories have partially waived the confidentiality of the agreement and its annexes. In the interest of the investigations, some documents and information were kept confidential. A public version of the Anticompetitive Conduct Records is available here.

At the end of the Administrative Inquiry, it behooves to CADE´s General Superintendence to decide on the initiation of an Administrative Proceeding, in which evidence of economic infraction is collected and the individuals and legal entities are indicted. At that stage, the defendants will be notified to present their defense. At the end of the investigation, the Superintendence issues an opinion on the conviction or the filing of the case concerning each defendant. The conclusions are forwarded to CADE’s Tribunal, responsible for the final decision.

The final judgment in the administrative sphere is responsibility of the Tribunal, which may impose fines of up to 20% of company´s turnover. Fines ranging from BRL 50 thousand to BRL 2 billion may also be imposed on individuals. The Tribunal may also take other measures if necessary to deter conduct.

Cade's leniency agreements

This is the fourth Leniency agreement signed with CADE within the scope of the Car Wash Operation. The previous agreements were signed with the companies Setal/SOG and some employees concerning the public bids in Petrobras’ onshore platforms; and twice with Camargo Corrêa and some of its employees, one in public bids regarding Angra 3 nuclear plant; and the other in public bids conducted by the state-owned company Valec, concerning the North-South and West-East Railroads.

As established by Law 12.299/2011, the Leniency agreement aims to obtain information and documents that prove the existence of a cartel, as well as to identify the other participants in the conduct. The agreement may be signed in cases where, at the time of its signature, CADE does not yet have enough evidence to ensure the conviction of those involved.

Leniency agreements are only signed with the first applicant (or its economic group), which must cease its involvement in the conduct, confess the wrongdoing and cooperate fully and permanently with the investigations, identifying others involved and providing evidence and relevant information. Leniency agreements benefit the signatories with the termination or reduction of one to two thirds of the punishment in the administrative sphere. The agreement is signed jointly with Prosecution Office and benefits the signatory with criminal immunity regarding the cartel crime.

The Leniency agreement is an instrument used by competition authorities in several countries to unveil cartels. Since 2003, CADE signed nearly 60 Leniency agreements.c